Enough ORP users have applied their editing skills to
the semi-literate prose of the ORP help documents so
that it seemed time to set up a communication channel for
such contributors that would be easy enough to use such that
they would be encouraged to apply their skills.
Click here
to make your contribution.

05/01/2017: Social Security OASI Depletion in 2035

The Social Security and Medicare Boards of Trustees estimates
that Social Security's Old Age and Survivors Insurance (OASI) Trust Fund
has a projected reserve
depletion date of 2035. At that time, OASI
income would be sufficient to pay 77 percent of scheduled OASI benefits.
Since this is fact, until Congress changes the law, ORP reduces
Social Security income by 23% beginning in the year 2035.

03/19/2017: Tax Table Update

ORP is now running with the 2017 Federeal tax table.

03/13/2017: New Infrastructure

Beginning the process of switching ORP from 1990 WATCOM compilers,
c and FORTRAN, to 2016 Netbeans and gnu.

03/06/2017: Enhance the 3-PEAT Simulator

Add the facility to download an Excel spreadsheet containing
a summary of the simulator's output.

02/26/2017: Add the 3-PEAT Simulator

he simulator simulates the actions of a retiree that runs
ORP annually with changed initial conditions (savings balance,
Social Security income, etc.) to determine the current year's
savings withdrawals and spending budget. Historical
data are used to assess plan performance
under historical financial conditions. In particular,
the plan is reviewed for premature savings depletion and
excessive disposable income volatility.

08/03/2016: Capping IRA to Roth IRA Conversions

ORP's IRA to Roth conversion option has been enhanced for users who
choke up on conversion's large IRA distributions early in retirement.
The enhancement allows you to cap taxable income within your choice of
tax brackets. Setting
this parameter to 15% or 25% will cap conversions and usually string
them out over more years.

The enhancement is targeted to planners who advocate this strategy
to let them assess the economic consequences of their choices.
It's all a matter of balancing the maximizing of retirement disposable
income with being comfortable with IRA distributions (not quantifiable).

6/13/2016: Affordable Care Act Income Test Tightened

Models which contain non-savings income (Social Security benefits,
pension income, post retirement earnings, etc.) after retirement
and before Medicare are infeasible when this income exceeds
ACA income limits. ORP now checks for this condition and
disables ACA income limits when they are exceeded by this
non-savings income.

4/4/2016: Affordable Care Act Constraint Relaxed

ORP now allows for modeling ACA income restrictions
while specifying minimum bounds on the Roth IRA and
After-tax accounts. Formerly this was disallowed because
it was creating infeasible models in most cases. This
was accomplished by not applying the minimum bound requirement until
age 65, when the ACA income restrictions no longer apply.

3/23/2016: Income Tax Table

ORP's Income tax
brackets have been updated to reflect changes for 2016.

2/25/2016: ORP's Third Article

A third article featuring ORP has been published in The
Journal of Personal Finance:

Measuring the Financial Consequences of IRA to Roth IRA Conversions.
See page 47

11/28/2015: Spending Specification

A new parameter has been added to the parameter page with
which the user can specify a level of spending and ORP
will compute the maximum estate associated with that level.

10/28/2015: File and Suspend

The Social Security Administration has plugged the File
and suspend loop hole and it has been removed from
ORP.

9/15/2015: ORP's Second Article

A second article featuring ORP has been published in The
Journal of Personal Finance:

A Quantitative Evaluation of Four Retirement Spending Models.
See page 43

7/30/2015: New Spending Models Added

Three new spending models have been added to ORP. Previously ORP supported the
constant spending indexed to inflation and Reality Retirement
Spending models. The new models are described in the journal article
to be published in September.

4/15/2015: ORP Gets Published

A article featuring ORP has been published in The
Journal of Personal Finance:

Measuring the Financial Consequences of IRA to Roth IRA Conversions.
See page 47

11/18/2014: Affordable Care Act Cliff

An option has been added to the input form that will
cause ORP to limit income subject to personal income taxes
to be less than the limit required to receive ACA
medical insurance premium subsidies.
The limit applies from the start of early
retirement until Medicare begins at age 65.

10/13/2014: Specifying Savings Accounts Minimum Balances.

Minimum balances for one or more savings accounts can be specified
on the parameter screen. This allows the user to concentrate
her estate in the Roth IRA or IRA to take advantage of
preferential tax treatment of tax advantaged accounts.

10/08/2014: Assigning Different Stock/Bond Distributions
to Different Accounts.

The ORP parameter form has been expanded to permit the
user to specify different stock percentages to different accounts.
For example the IRA could be 100% stocks
and the After-tax account could be 0% stocks and thus 100%
fixed income. This gives the user the ability to do separate glide path
modeling for the three accounts.

10/01/2014: Spreadsheet Download

A link has been added to the first page of the ORP results to download
a summary of the run in csv format suitable for use by Microsoft's Excel
among others. There are two parts to the report. The first is the
withdrawal report and the second is the Sources of Other Income report.

09/13/2014: Spousal Pension Benefit

Some pension allow for the spouse who lives longer to collect a percentage
of a worker's pension, or vice versa. ORP now includes this feature.

08/22/2014: Government Pension Offset

Workers who contribute to a government pension and who do not contribute
to Social Security are not eligible for spousal
benefits. The signal to ORP that spousal benefits are not
permitted is an explicit 0 (not a blank) in the amount of
Social Security benefits field.

08/22/2014: Partial exclusion of Social Security benefits and pensions.

States are amazingly inconsistent in how they tax Social Security Benefits and
pension income. Some states tax them not all, some state tax them all, and some
states exclude part of them and tax the rest. Two new fields have been added at
bottom of
the ORP input form to specify how Social Security benefits and pensions are taxed
or excluded from state taxes.

07/28/2014: Glide Path Option.

A Glide Path is a series of events or actions
leading smoothly to a particular outcome. For retirement planning a glide path
is making annual adjustments to the mixture of bonds and stocks
in retirement savings to reduce portfolio volatility and to insure there
is money available for spending without needlessly depleting savings.
ORP normally assumes 100% invested in stock for
the entire retirement term. ORP has been enhanced to include a glide path
option.

07/16/2014: Tax Report Enhancements.

Two columns have been added to the Tax report.

The taxes column from the Withdrawal Report is replicated on the right side
of the report.

A new column, titled CapGaina, displays the capital gain taxes paid on the
increase in value of the
assets in the stock sub account of the After-tax Account.

06/29/2014: The After-tax Account is divided into two sub accounts.

The After-tax account is now consists of two sub accounts, a stock sub account and a
fixed income sub account. The two sub accounts are taxed differently; the stock
sub account is subject to capital gains taxes while the yield on the fixed income sub account
is subject to the same personal income taxes as the rest of the model.

05/10/2014: Taxes on IRA to Roth IRA Conversions

Several users have found the early, large IRA to RothIRA conversions and the accompanying
high taxes to be implausible. To shed some light on this issue a check box has been added
to the ORP parameter screen that will block IRA to Roth IRA conversions.
No conversions, no taxes.

05/06/2014: Exempting Social Security Benefits from State Income Taxes

Twenty Seven states and the District of Columbia exempt Social Security benefits from
state income taxes. A check box has been added to the ORP parameter input form for
users who plan to retire to one of these states.

05/10/2014: Taxes on IRA to Roth IRA Conversions

Several users have found the early, large IRA to Roth IRA conversions and the accompanying
high taxes to be implausible. To shed some light on this issue a check box has been added
to the ORP parameter screen that will block IRA to Roth IRA conversions.
No conversions, no taxes.

3/10/2014: Separate Life Expectancies

The ending age of the plan is no longer specified by a termination (Term) age.
Instead, two separate life expectancies can be specified.
At the younger age pension and Social Security benefits
cease for that spouse and Spending is cut in half. If nothing is specified then age 92 is the
end of the plan for both spouses.

This feature aids in the evaluation
of widowhood situations.

02/10/2014: File and Suspend

File and Suspend (aka Claim and Suspend) is a method of
maximizing Social Security benefits.
When both spouses have Social Security benefits one
spouse may file and
suspend his benefits, from Full Retirement Age (FRA) to age 70.
The other spouse receives spousal benefits but not her own benefits.
This delays starting Social Security benefits for both spouses
until age 70, when benefits are greatest,
while at the same time providing some income for the
couple between FRA and age 70. The file and suspend option is applied
for married couples when both Annual Social Security Benefits
are specified and neither Age to begin Social Security is specified.
For details .

01/11/2014: Spousal Benefits

Spouses of retirement age who are eligible for little or no Social Security benefits
based on their own employment record
will receive benefits equal to one half of the retiree's benefits.
The Social Security Administration automatically grants the higher amounts where
spousal benefit requirements are met.
ORP has been enhanced to include this option where appropriate.

01/04/2014: Mortgages on Illiquid Assets

Prior to this enhancement when an illiquid asset was sold the amount of money
transferred to the After-tax account was the sale proceeds minus capital gains taxes.
If the illiquid asset is encumbered by a substantial mortgage or other secured loan then
paying off the loan should be included in this computation.

ORP's input parameter screen has been enhanced to include fields for specifying
loans secured by illiquid assets.

12/28/2013: Refine Sale of Illiquid Assets

ORP assumes that spending follows the annuity model in that the spending
level is established at the beginning of retirement and that it's level is adjusted
for inflation each year thereafter.

Unfortunately ORP gets into trouble with models that are a little short on liquid assets
and depend on the sale of a valuable illiquid asset to fund the latter part of retirement.
When the distribution of asset sales, spread across the remaining term of the plan,
exceeds the spending levels of the early part of the plan ORP falls into a mathematical
black hole.

The model formulation has been adjusted to violate the annuity assumption and
allow for spending levels at a higher annuity level after the sale of illiquid assets.

This change will rid us of some of those nasty infeasible model messages.

12/01/2013: Update Estate Tax Tables

ORP's estate tax tables have not been updated since the start of ORP in 1996. That
issue has been remedied. The estate tax tables really don't matter that much
since most specified estates are well below the $5 million exemption boundary.

11/15/2013: Refined Account Returns

The choice of asset rates of return has a significant impact on the resultant
retirement plans. Currently ORP allows for different kinds of assets to be assigned
to different retirement accounts to reduce taxes and reduce overall portfolio volatility.

Investment strategies may be modified when retirement approaches.
ORP has been enhanced to allow for different rates of return during the accumulation
period as well as during retirement. Three additional parameters have been added
to the ORP parameter form so that asset rates of return can be specified for different
accounts in the two phases of the retirement plan.

9/23/2013: Bar Graphs Are Back

Bar graphs have returned to some ORP reports. They were formerly there but disappeared
in the late 1990's when ORP switched to an Internet service provider that did
not have the necessary graphing software. ORP has switched Internet providers again and
the necessary software is available again.

9/15/2011: New White Paper

A new white paper has been added to ORP's first page, right hand column,
The ORP Advantage

In this paper retirement savings account withdrawal plans computed by a linear
programming optimizer are compared to the ubiquitous, conventional wisdom strategy to
measure the degree of improvement that the optimal plan offers.

8/12/2011: Illiquid Assets

ORP now supports two different types of illiquid assets:

The family dwelling

All other illiquid assets.

Other illiquid assets include businesses, partnerships, real estate, inheritances,
collections, etc.
The difference is that when selling the family residence there
is a $500,000 exclusion from capital gains tax for married couples, $250,000 for singles.
The full capital gains tax has to be paid on the profit of the sale of all other
illiquid assets.

2/27/2011: Separate Ages of Retirement

An alert user points out that in this day and age married spouses
may have different ages of retirement because:

One spouse may be considerably younger than the other.

Chronic illness to one spouse and not the other.

Employment provides health insurance for the spouse too young for Medicare.

A mental model in which each spouse says my account is my account and there
is no our account.

One spouse enjoys working and the other doesn't.

ORP's assumption was that when one spouse retired both retired.

ORP has been enhanced to give different ages for each spouse's retirement. Thus
contributions to a tax advantage account may continue for one spouse while the other
is drawing down their tax advantage account. ORP does not allow contributions
to the Tax-deferred Account after age 69 as per IRS regulations.

10/04/2009: Monte Carlo Option

A new toggle has been added to the bottom of the parameter input form. When it is checked
ORP runs in its Monte Carlo mode, whereby each year's investment return
is generated as a random number before each
of a series of runs. Instead of a cash flow plan the Monte Carlo reports the
average of the amount available for spending over all of the runs. See the
Monte Carlo help document for more details.

02/22/2009: Capital Gains on Sale of Illiquid Assets

Up until the age of divestment the balance
of the illiquid asset account grows at the rate of inflation. At the age of divestment
the balance of this account is transferred into After-tax account. The
amount of transfer is reduced by capital gains tax on the difference between
the value of the asset and its basis. ORP assumes that the illiquid
asset is the retiree's home. The capital gains exclusion ($250,000 for a single
retiree, $500,000 for a couple) is applied before capital gains taxes
are computed. Both the capital gains rate and the illiquid asset basis
are on the ORP input form and discussed in that form's help document.

9/21/2008: Early Roth IRA Withdrawals

An astute ORP user points out that when doing a partial IRA to Roth IRA
conversion the money can't be distributed from the Roth IRA for 5 years
without incurring a 10% penalty.

A check box has been added to the ORP parameter form to select this option.
When the box is checked ORP applies Bernicke's results to reduce
retirement spending for each of the 65-69, 70-74 and the 75 and up age groups.

The end result is to increase spending in early retirement and lower it in
late retirement. The early increased spending ends up reducing the total
plan value by a small amount. This is due to increased personal income taxes
in the early years of retirement
and loss of investment return on money that is spent rather than saved.

Bernicke shows that late in life under spending will leave a substantially larger
estate than is planned for by retirement calculators.
The idea is spend it while you can enjoy it.

06/11/2008: Reverse Mortgage

ORP now includes both lifetime payment and lump sum reverse mortgages.
A reverse mortgage
is a way for retirees to get access to the equity in their homes while continuing
to live in them.
Mortgage rates
vary widely between institutions and some fees can be very expensive.
A reverse mortgage
starts off with a small balance which increases monthly by mortgage interest,
real estate taxes, insurance
and, in the case of the lifetime payment option, a payment to be used
for spending. For some retirees the reverse is a great thing. The reverse mortgage is
discussed in more detail in the parameter screen
help file.

06/01/2008: Scheduling Contributions

This enhancement extends ORP's optimization to the accumulation side of retirement,
i.e. pre retirement
contributions into one of the three account types:
1)Tax-deferred, 2)Roth-IRA and After-tax.
ORP balances the withdrawal schedule against the contribution plan to
compute which account to annually contribute to and how much to contribute.
The user's best judgement is replaced by optimization.
The account contributed to may change as the retirement year is neared.

4/13/2008: IRA to Roth IRA Conversion

Beginning in 2010 all or a portion of an IRA can be converted
into a Roth IRA without restriction, ORP has been enhanced to
model this change in the law.
ORP will do a series of partial conversion to reduce personal income
taxes. Conversions will appear in the
Withdrawal, Tax-deferred Account and Roth IRA Reports.

01/29/2008: Inflation of Estate

The desired balance for the estate is now entered in current dollars and
ORP computes the estate at the end of the plan in inflated dollars.

7/31/2007: The 2003 Tax Law Revision

The ORP tax tables are updated to reflect the percentage tax and tax bracket
upper bounds as legislated by the 2003 tax law revision.

04/09/2001: Passing Your IRA Through To A Beneficiary

ORP has assumed that your estate will liquidate your Tax-deferred Account, pay the
personal income taxes due, and distribute the remainder to your beneficiaries.

The IRS provides an option that is more attractive to the beneficiary of your IRA,
if you designate one. If your are married ORP assumes that your spouse is your IRA
beneficiary and your IRA becomes your spouses IRA without any tax consequences. If
you are unmarried and you specify a beneficiary for your IRA then your IRA passes
to that beneficiary with no tax consequences.

The advantages of this approach to an unmarried individual are:

Her beneficiary will continue to enjoy the compounding advantages of a
Tax-deferred Account.

She does not have to manage the distribution from her IRA in a manner intended
to lower her personal income taxes.

Assuming that her beneficiary is more than 10 years younger than she is, she
will have a lower minimum required distribution. See the next item below.

Of course the beneficiary will have to pay personal income taxes on all distributions.

ORP has been modified to pass the Tax-deferred Account to the estate without paying
personal income taxes. This assumes that only one partner of a married couple
survives to the end, that the After-tax Account has been converted an IRA, and that the
surviving partner has designated a beneficiary for the IRA. Under the new IRS regulation
discussed next this is all very easy to accomplish.

Since the tax consequences of inheriting an IRA are passed to the beneficiary, ORP will
compute a slightly higher annual spending amount using this revised formulation.

11/07/2000: Early Retirement

Withdrawals from the Tax-deferred Account before the age of 59½ are not subject
to the 10% early withdrawal penalty providing that they are "part of a series of substantially
equal periodic payments" taken at least annually until the age of 59½
or for five years, whichever is longer. (IRS Code 72(t)).

ORP's optimal withdrawal level now honors the IRS requirement to fix all withdrawals
before the age of 59½ at the same level. ORP does not to attempt to model
the details of any of the three IRS sanctioned early withdrawal methods:

Life Expectancy: which gives the smallest annual withdrawal.

Amortization: which gives a larger annual withdrawal.

Annuity Factor: which gives the largest annual withdrawal.

ORP does provide the optimal level of withdrawal from the Tax-deferred Account
for early retirement. You may then select the IRS sanctioned
method that most closely matches the computed level. For a description of
the IRS Early Withdrawal methods see the
Retire Early Home Page.

There can be some interesting results because spending increases by inflation every year
even though Tax-deferred Account withdrawals are fixed. If there are sufficient funds in the
After-tax Account the difference is made up from there each year. If the After-tax Account
is small then the fixed withdrawal will be larger than necessary during the early years and
the excess is transferred to the After-tax Account. Then the After-tax Account is used to
cover the difference between spending and Tax-deferred Account withdrawals during the years
just before 59½, or the 5-year expiration.